"Audit exists where there is an accountability relationship. It is a process that is superimposed on this relationship to establish that a report on the responsibility assumed is a correct and fair one and is usually performed by a third party, largely serving the interests of the party who delegated the responsibility. To illustrate this relationship, in the Government context, we have the Auditor General reporting to Parliament on the stewardship of Ministries, Departments and public bodies in managing public funds entrusted to them.
The State Audit System operates within the Administrative system and its development has to a large extent been influenced by the progress of political and socio-economic systems. A paper presented at the Asian Organisation of Supreme Audit Institutions Seminar on the "Role of Supreme Audit Institutions in National Development" in Korea in April 1982 talks of a nation's development according to Political Scientists, Economists and Sociologists and theorises on the linkages with the State Auditing System. The paper argues that in national development, the linkages between political and socio-economic development could broadly be classified into 4 stages i.e.
In the 'maintenance' phase, governments are seen to be tied up with matters of law and order and only concerned with essential services. This is characterised by the line item budgets of the governments in that period. The emphasis here is on regulatory and compliance.
In the 'mobilisation' stage, government efforts are directed towards mobilising resources towards a 'take off by providing incentives in developing infrastructure and basic industries. The budget system here is target orientated and the emphasis is on economy and the proper utilisation of scarce resources.
In the third stage of 'guidance', the paper postulates that governmental role becomes more sophisticated and indirect. Industrialisation has taken hold and there is greater private sector involvement in development. The focus of the national budget is on the cost and efficiency of programmes.
In the final stage of 'co-ordination' it is argued that the economy reaches a mature state of a welfare oriented industrial society. The concern is for equitable distribution of wealth and services. The national budget reflects this thinking it becomes output or delivery oriented, in other words it underscores the effectiveness and impact of government programmes.
Whether we accept this theoretical concept or not that political and socio-economic systems have influenced the direction in which auditing has moved, there is no denying that audit emphasis has developed from a regulatory and financial compliance audit to one of economy, efficiency and effectiveness aspects in gradual stages.
The Role of the office of the Auditor General (OAG) in the Public Sector has to a great extent been a legacy of history. Its status within the administrative system and its relationship with it and the political systems have undergone little change. However, the role may have either been enhanced or remained stagnant or diminished depending very much on the evolution of the political climate in the State. The OAG can develop only to the extent that it enjoys the support within the administrative and political systems. In a favorable political climate support can very often be enticed if the OAG reacts, positively to economic and social changes taking place in the country In the normal developmental stages, the OAG traditionally has addressed itself to matters which dealt with regularity, propriety and compliance. The position seemed appropriate in that environment where resource mobilisation and allocation was essentially channeled for the betterment of public services. However, with accelerated economic development, the need for proper accountability of public funds becomes vital. The system has to be revamped to ensure proper implementation of projects and programmes in the attainment of national goals. With the change in the tempo of development, it is essential that:
These areas are the concern of management. Very often management does not respond promptly or effectively to changes, and the OAG has to ensure that with these changes public funds are properly safeguarded and utilised efficiently. There is, therefore, this shift in emphasis in the role of the OAG. In order to cope with this new role the OAG has had to:
The Role of the OAG in many countries has been that of a catalyst. The OAG can generate changes by intervention. To perform satisfactorily, the environment within the system must be conducive. Proper accounting standards must be enforced and on the part of the OAG, steps must be taken to ensure that adequate auditing standards are established.
With the expansion in public sector activities and spending by governments in pursuit of development, numerous public enterprises have been established, greater autonomy given to local authority administrations and a number of public operations have been privatised. In addition, various means in raising revenues, in the investment of funds and in borrowings have, in totality, changed the character, scope and dimensions of public accountability.
It is in this context that a number of issues relating to the changing Role of the Auditor General must be examined.
Public Auditors have taken on responsibilities of evaluating Government's adequacy in terms of management, performance and results. This includes evaluation of operations in terms of economy, efficiency, effectiveness and impact. Honesty and integrity in financial matters on the other hand, can be determined to the extent that entities comply with laws, regulations and contractual requirements.
The question naturally arises as to whether the Auditor General has adequate legislative mandate to carry out these functions effectively and unfettered by extraneous pressures. In some countries general provisions in audit laws authorise the Auditor General "to undertake such duties and functions as he deems fit." In other countries, the law makes specific provisions for the Auditor General to undertake "economy, efficiency and effectiveness" audits in addition to the traditional financial and compliance audits. Assuming that the Auditor General has a legal mandate, he has to have statutory powers to effectively carry out these functions. The scope and nature of audit should be spelt out in the law. Access to information including records and documents' in government companies and their subsidiaries must be unencumbered and readily available and investigations by the auditors should be unhindered. Anything short of this, will make it an ineffective piece of legislation in the statute books.
It follows that to discharge these duties effectively, the Auditor General must have adequate resources. He must have at his disposal relevant expertise to cope with the demands of technological changes in the keeping of financial records, of evaluating management performance and of reviewing results of complex socio-economic programmes. It is, therefore, clear that the Auditor General must be ensured independence in the selection and training of his staff and in obtaining consultancy services where the need arises. Independent funding will also ensure that the office is properly equipped, adequately staffed in terms of numbers and audit programmes are carried through as planned. Many Supreme Audit Institutions (SAl's) are to this day dependent on central agencies of government for their budget and staffing requirements including recruitment. The executive branch of the administration may profess impartiality in meeting budget and staff requests of all departments. At best unhappiness with the allocations of budget, staff and with recruitment is spread equally amongst all departments and at worst the SAI may get the crumbs as implementing agencies get first priority. If the Auditor General is not able to get the right calibre of staff, the professionalism of his work suffers and is brought to question and his credibility is at stake. What is far worse is that he cannot claim immunity from charges of negligence for any omissions or commissions that his staff may be blamed for.
Another issue which comes to mind is that with the extended scope of audit, the performance of the bureaucracy comes under close scrutiny by the Auditor General and there might be a tendency by the executive to view the Auditor General as "becoming too big for his breeches". This situation should be played down as much as possible because once the administrators feel intimidated and threatened there is bound to be confrontation. Still worse if it is found that the Auditor General does not practise what he preaches. A situation such as this could be counter productive.
Auditors General are confronted by and are sensitive of their independence 'in theory' and independence 'in fact'. Some SAIs may discover that the wide powers that are given them in legislation are mere window dressing. Auditors General cannot extricate themselves from the political environment, traditions, practices and precedents. SAIs with long histories enjoy greater independence, freedom and flexibility in discharging their duties as they have become institutionalised and are well protected by law and tradition. This is not so with many of the newly developing SAIs. However, to a greater or lesser extent, all SAIs are subject to external pressures or influences which ultimately affect their independence. Earlier on, I drew attention to legal and financial independence. Restriction in these two areas will severely curtail the independence of the SAI. Sometimes political pressure can be brought to bear on the Auditors General either directly or through the legislature and/or the executive limiting the period of the Auditor General's appointment to a short term thereby disrupting the continuity of the Office or by trying to influence or limit, either the Scope or Nature of his Audit. One cannot also discount the fact that Auditors General may also succumb to their own natural bias where they may or may not be inclined to report on certain matters or be influenced by their professional groups or firms with which they have had ties. The mass media also exact some pressure in an indirect way in influencing the Auditor General in the direction of his audits.
The Auditor General very often in the course of his work becomes privy to highly sensitive or secret information involving matters pertaining to national defence or the national economy. Imprudent spending, flagrant violation of laws or contractual obligations, uneconomic or inefficient procurement practices in these areas could excite remark by the Auditor General and he may feel duty bound to report this in the public interest. Deliberate policies of the government in power in implementing ambitious programmes in the national interest could run up huge national debts and drain the country's coffers leaving the problem to be solved by succeeding government and posterity. The long term effects of such policies are of public interest but are controversial and present a dilemma to Auditors General. However, in the broader context, he has to consider whether such disclosure will be in the national interest as repercussions may be far reaching and detrimental to the long term interest of the nation. In such a case, will the only alternative open to the Auditor General be to record his displeasure on the issue with the government?
Another issue which is currently topical is what is generally referred to as 'policy audit'. Much attention has been focused on what the limits of state audit are and the areas of concern state audit can legitimately review. Many government operations could be put 'out of bounds' by simply labelling them as policy matters but this could pose serious problems for Auditors General. Often this could be a devious defensive mechanism to neutralise investigation and review by state audit. However, policy decisions, which conflict with the law, or are deviations from accepted moral or ethical standards or are based on evidently wrong premises, or result in unwarranted expense or extravagance, or are disruptive to administrative systems and processes, might warrant a second look. The Tokyo Declaration of "Guidelines on public accountability" resulting from the Second International Seminar of ASOSAI in Tokyo, Japan in May 1985 recognised that the selection and formulation of policies and strategies of development and specific programmes to achieve national objectives are the functions of planning and other relevant agencies and recommended that bearing in mind that the concept of audit is an independent and objective activity, the issue of assessing policy decisions may be left to the discretion and sound judgement of each SAI since their reviews may, at times impinge upon questions of policy and the selection of strategies.
There is a common notion. that unlike Certified Public Accountants (CPAs) whose clients seek assistance, government auditors are adversaries of the audited agencies and other interested parties. I would like to think that with our current responsibilities and changing attitudes, and commitment to public accountability, public auditors are agents for good government. Auditors General have long shunned involvement in the decision making processes to ensure detachment and objectivity. I still subscribe to this tenet. However, there
are very many grey areas where government auditors have and can offer the benefit of their advice and experience in influencing decisions. Any such involvement is highly discretionary but should not compromise the independence of the Office.
High Profile Office
The Auditor General is a vital link in the accountability process. To effectively perform his duties, it is necessary for him to get the widest publicity for the results of his work. Although his reports may be public documents, they will not get the wide publicity they deserve unless they are highlighted in the mass media. Adopting a high profile stance is, therefore, necessary to keep in public view the work of the SAI for otherwise audit reports may only be of archival interest.